Editorial: Heeding the lessons from bank bailouts

File photo by Richard Drew / The RepublicanThe headquarters of Goldman Sachs, in New York, is seen last June. On Wednesday, Greg Smith, an executive director at the bank, resigned with a blistering editorial in the New York Times that accused the bank of losing its moral fiber,and putting profits ahead of customers' interests and dismissing customers as "muppets."

The bank bailouts worked. Let the party begin again.

That would be one way to look at the results of the latest stress tests of the nation’s largest banks. And it would be, of course, shortsighted in the extreme, likely leading directly to the kind of recklessness that got us into such a mess in the first place.

Keeping the banks on an exceedingly short leash kept them also on the straight and narrow. Ensuring that they don’t stray too far afield remains of paramount importance.

That’s another takeaway from the latest round of tests – and one we’d prefer.

Nearly all of the nation’s largest banks passed the newest round of stress tests designed to see how they’d fare during another economic crisis. The questions, boiled down, came to this: If economic calamity were to revisit our land, with markets crumbling and unemployment going through the roof, would the big banks be stable enough to keep on going, or would they fall to pieces too?

Fully 14 of the 19 banks passed the tests with flying colors, and another four were given provisionally high grades – if a few modifications were made.

This is undeniably good news – unless it is seen as a license to fire up the ridiculousness again.

In the first round of stress tests back in 2009, the nation’s large banks were found to be on shaky ground indeed. And now, thanks to a big influx of federal money and careful government oversight, they are standing tall.

With this good news comes responsibility: The banks must never again return to their pre-crash ways, putting gigantic profits first, betting the house at nearly every turn and worrying about the consequences – well, whenever. Or never.

The big banks got out of that gigantic hole with a huge pile of public money. What they need to do now is to start lending – responsibly – to qualified individuals and worthy businesses.